The Michigan use tax is a 6% tax you owe as the buyer when a taxable purchase happens and no Michigan sales tax was collected. It most often shows up on out-of-state online orders, goods bought in another state and brought home, and private-party sales of vehicles, boats, and similar titled property. The rate matches Michigan’s sales tax, and you never owe both on the same transaction.
What the Tax Is and Who Owes It
Use tax is the companion to sales tax. Sales tax is collected by the seller at checkout. Use tax is your obligation as the buyer when the seller didn’t collect Michigan sales tax on a taxable item you then use, store, or consume in the state. It is imposed under MCL 205.93 on tangible personal property and certain taxable services.1Michigan Legislature. MCL Section 205.93 – Use Tax Act
The obligation doesn’t disappear because no one billed you for it. Anyone storing, using, or consuming taxable property in Michigan remains liable until the tax is paid to the Michigan Department of Treasury.2Michigan Legislature. Michigan Code Act 94 of 1937 – Section 7
When You Owe Use Tax
The most common trigger is an out-of-state purchase, whether online, over the phone, or in person, where the seller doesn’t collect Michigan sales tax. Since the Wayfair decision, many large online retailers do collect it automatically, but plenty of smaller sellers still don’t. If the receipt shows zero sales tax on a taxable item, use tax is due.
Buying goods in another state and bringing them home counts too. Pick up furniture in Ohio or electronics in Indiana, drive them back to Michigan, and use tax applies. You may get a credit for sales tax already paid to the other state, covered below.
Businesses run into use tax when they pull inventory off the shelf for their own use. Supplies bought tax-free under a resale exemption become taxable the moment you convert them to your own operations.1Michigan Legislature. MCL Section 205.93 – Use Tax Act
Vehicles, off-road vehicles, mobile homes, aircraft, snowmobiles, and watercraft bought from anyone who isn’t a licensed dealer or retailer also trigger use tax. That covers every private-party sale, whether it came through an online listing, a neighbor, or a family friend.3State of Michigan. Use Tax
Credit for Tax Paid to Another State
If you already paid sales or use tax to another state on the same item, Michigan gives you a dollar-for-dollar credit. When the other state’s rate is 6% or higher, you owe Michigan nothing. When it’s lower, you owe only the difference.4Michigan Legislature. MCL Section 205.94 – Use Tax Act Exemptions
Buy furniture in Indiana and pay Indiana’s 7% sales tax, and Michigan gets nothing because Indiana’s rate exceeds 6%. Buy the same furniture in Colorado at Colorado’s 2.9% state rate, and you owe Michigan the 3.1% gap. The MI-1040 instructions put it plainly: if you paid at least 6% to another state, you don’t owe Michigan use tax.5State of Michigan. 2025 Michigan Individual Income Tax MI-1040 Instructions
One catch: the credit only applies if the other state offers a similar exemption for taxes paid to Michigan. Most do, but confirm on large cross-border purchases. Keep the receipt or invoice showing the tax amount and where it was paid. Without that proof, the credit can be denied on audit.
How to Calculate and Pay
The math is straightforward: multiply the purchase price by 6%. The tax base is the total price paid, excluding separately itemized shipping and handling charges.3State of Michigan. Use Tax
Individuals
Most individuals report and pay use tax on line 24 of the Michigan Individual Income Tax Return (MI-1040). The instructions include a worksheet with two parts. For any single purchase of $1,000 or more, you calculate the exact 6% tax on that item. For individual purchases under $1,000 each, you can calculate the actual tax or use an AGI-based lookup table that estimates what you likely owe on smaller items across the year.5State of Michigan. 2025 Michigan Individual Income Tax MI-1040 Instructions The table amounts are estimates; if your receipts show a different number, use the actual figure.
Vehicles and Other Titled Property
Vehicles, off-road vehicles, mobile homes, aircraft, snowmobiles, and watercraft follow a different path. You pay the 6% use tax to the Michigan Secretary of State before the title and registration transfer into your name. Don’t wait for tax season on these; the tax is due at registration.3State of Michigan. Use Tax
Businesses
Businesses file use tax returns with the Michigan Department of Treasury on a monthly, quarterly, or annual schedule depending on their filing requirements. Returns are due by the 20th of the month following the reporting period.6Michigan Legislature. Michigan Code Act 94 of 1937 – Section 6 A business that already holds a Michigan sales tax license does not register separately for use tax.
Common Exemptions
Not every purchase triggers use tax. Michigan exempts several categories under MCL 205.94:
- Purchases where Michigan sales tax was already collected. The two taxes never stack on the same transaction.4Michigan Legislature. MCL Section 205.94 – Use Tax Act Exemptions
- Property bought for resale under a valid exemption, as long as you actually resell it rather than use it yourself.4Michigan Legislature. MCL Section 205.94 – Use Tax Act Exemptions
- Purchases by organizations exempt from federal income tax under Section 501(c)(3) or 501(c)(4), when used for their exempt purposes.4Michigan Legislature. MCL Section 205.94 – Use Tax Act Exemptions
- Grocery food, food ingredients, and prescription drugs. Prepared food for immediate consumption, such as restaurant meals and heated deli items, doesn’t qualify.7Michigan Legislature. MCL Section 205.54g – General Sales Tax Act Food Exemption
- Property brought into Michigan by a nonresident for temporary use, if not used in business in the state for more than 15 days.4Michigan Legislature. MCL Section 205.94 – Use Tax Act Exemptions
Family Transfers of Vehicles and Watercraft
Transferring a vehicle, mobile home, watercraft, snowmobile, or aircraft to a close family member is exempt. Qualifying relationships include spouse, parent, child, sibling, grandparent, grandchild, stepparent, stepchild, stepsibling, legal ward, and legally appointed guardian.8State of Michigan Department of Treasury. Revenue Administrative Bulletin 2018-5 – Use Tax Exemption Transfer of Vehicles Since January 1, 2014, the exemption also covers transfers to a parent-in-law, sibling-in-law, child-in-law, and grandparent-in-law. Nieces, nephews, aunts, uncles, cousins, great-grandparents, and great-grandchildren do not qualify.
Digital Goods and Software
Pure digital goods, including e-books, streamed movies, downloaded music, audiobooks, podcasts, and digital images, are not subject to Michigan sales or use tax, whether downloaded, streamed, or accessed by subscription.9State of Michigan. Revenue Administrative Bulletin 2023-10 – Sales and Use Taxation of Computer Software and Digital Goods
Software is trickier. Cloud software you access entirely through a web browser, with no code installed on your device, is not taxable. If using the software requires downloading a desktop application or agent, the entire subscription fee is taxable as prewritten computer software.9State of Michigan. Revenue Administrative Bulletin 2023-10 – Sales and Use Taxation of Computer Software and Digital Goods In-app and in-game purchases follow the same logic: downloading additional code is taxable, while unlocking a service feature within an existing app is treated as a non-taxable service.
Penalties, Interest, and Records
Michigan adds a 5% penalty on unpaid use tax if you’re up to two months late. After that, another 5% stacks on for each additional month or partial month, capped at 25% of the tax owed.10Michigan Legislature. MCL Section 205.24 – Revenue Act Penalties
Interest accrues on top of the penalty. For the first half of 2026, the annual interest rate on underpayments is 8.48%, or roughly 0.023% per day.11State of Michigan. Interest Rate Due on Underpayments and Overpayments The rate resets every six months, so check the current Treasury posting if you’re settling an older balance. Interest and penalties compound quickly on large purchases like vehicles, which is why paying at the Secretary of State before registration matters.
Keep purchase records, receipts, and invoices for at least four years after the tax is due.12Michigan Legislature. MCL Section 205.68 – General Sales Tax Act Record Retention The Department of Treasury has a matching four-year window to assess unpaid use tax, measured from the filing deadline or the date the return was actually filed, whichever is later. If you never file, that clock never starts, so ignoring the obligation doesn’t make it go away.